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Rupee could open lower as dollar rebounds and UST spikes - HDFC Securities

After three day of gains, it’s a session of losses for Asian currencies and stocks as rebound in dollar index and spike in UST yields in overnight session. U.S. Treasury yields leaped as a measure of inflation expectations hit the highest in a decade, helping the dollar outperform most of its Group-of-10 peers.

The one month forward USDINR last quoted at 73.42, up 6 paise from yesterday’s 5pm level. Looking at the technical front, spot USDINR is having support at 72.50 and resistance at 73.15 level. The medium term bias remains bearish until pair closes above 73.80 level

On Wednesday, rupee recoups the previous week’s loss by gaining 65 paise or 0.89% to 72.72 a dollar which is a biggest single day gains after September 01, 2020. Domestic stocks enjoyed a monster rally, with the Benchmark Nifty50 Index gaining 2.2% to 15246, erasing previous week’s losses and closed at life high levels, on expectation of fund inflows in primary and secondary market

So far this quarter, foreigners have bough more than $5 billion equities. Market sentiments turned favourable for risk-assets as well as for Asian currencies as the yield curve bull flatten, a dollar rally that has been threatening in recent sessions has just taken a step back once more.

U.S. President Joe Biden agreed to moderate Democratic demands to narrow eligibility for Covid bailout checks, but party leaders in the Senate are resisting a push to trim extra unemployment benefits as they try to consolidate support for the administration’s $1.9 trillion pandemic-relief bill.

The U.K. inflamed tensions with the European Union by reneging on part of their post-Brexit settlement, saying it would unilaterally change trade rules relating to Northern Ireland.

Technical Observations:

USDINR March futures formed third bearish candle and partially fill the gap formed on Friday.

The pair closed below short term moving averages.

Momentum oscillators and indicators again turned neutral to bearish on daily chart.

There is higher chances of short covering bounce after three days bearish candle and covering the bullish candle.

We expect short covering in today’s session and expecting 73.25 level while 72.80 remains the support.

USDINR March Daily Chart

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